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Builders Risk

What is a Primary and Non-Contributory Endorsement?

What is a Primary and Non-Contributory Endorsement?

Contingent on the business, a primary and noncontributory endorsement can be an important part of an insurance policy. Credible businesses who understand the value of proper insurance coverage may want to require the parties they do business with to have insurance that includes them as an additional insured on a primary and non-contributory basis.

In order to truly recognize the importance of the primary and noncontributory endorsement, we must break down and analyze the terms "primary" and "noncontributory" separately.


Primary:

When an insurance policy is considered “primary” it will pay out first in the event of a loss. If there are two policies covering the same risk, the policy deemed “primary” will pay out its limit before the secondary policy and is responsible for the defense costs until liability is determined. This is important because if there is a claim, you want to the other party’s insurance to pay out first if there is a loss as well as pick up the defense costs.

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Noncontributory:

When and insurance policy is considered “noncontributory” the insurance carrier issuing the policy will not seek contribution from an additional insured if it pays out a loss.

For example, ABC general contractor needs some help constructing a building and hires XYZ subcontractor.  XYZ names ABC as an additional insured on a primary and non-contributory basis. If a claim arises and XYZ’s insurance company pays out, the noncontributory endorsement prevents them from seeking contribution for the loss from ABC. 

This is important because if the other party’s insurance pays out a claim, you don’t want their insurance carrier coming after you after claiming you were partially at fault and should responsible for contributing to the loss.


Primary & Noncontributory Endorsement (CG 20 01):

If you are named as an additional insured on a policy containing a "primary and noncontributory" endorsement, that policy will generally pay out first, cover the defense costs associated with the claim and be estopped from seeking contribution from you.  This endorsement is ideal for general contractors because it helps transfer the risk associated from the negligence of one of its subcontractors.

To learn more about primary & contributory coverage or proper risk transfer in general, contact us to set up a review of your insurance.


THE SKYLINE DIFFERENCE

Other brokerages take a cookie cutter approach to insurance and outfit their customers with generic coverage.  Skyline is different.  We believe insurance should be built on innovation and experience. We appreciate the fact that every engagement is unique and understand proper coverage requires a deep understanding of the underlying business and individual.

"The opportunity to safeguard your concerns is a privilege we never take for granted."

7 Tips for Managing Certificates of Insurance

7 Tips for Managing Certificates of Insurance

For those who do not know, a certificate of insurance ("COIs") is a document, which summarizes an insured’s coverage as it pertains to a particular risk. More often than not, COIs are issued to third parties who require evidence that proper coverage is in place. If handled irresponsibly, Certificates of Insurance COIs can be a cumbersome issue for your business. Here are 7 tips for managing certificates of insurance:


1. Get it from the broker:

Did you know an insured is prohibited by law to issue its own COI? In order for a COI to legally be issued it needs to come from a licensed insurance broker. To avoid any issues, ask an insured’s broker for a COI directly.

2. Set specific and concise requirements for EVERY risk:

There is no such thing as a universal insurance policy for every risk you encounter, determine the specific coverages necessary to ask for in the COI. Developing insurance guidelines specific to each risk you manage is the best way to ensure proper coverage. 

3. Don’t be afraid to voice your concerns:

At the end of the day, you are responsible for protecting the well-being of your business. If you sense or recognize an insured’s COI is not compliant with your requirements say something. Even if you are wrong, developing the habit of questioning and understanding the coverages listed in a COI will pay dividends for you in the future.

4. Create a system for managing COIs:

This may not be the most exciting part of your day but it will save you from misery in the future. Creating an internal system for managing and overseeing COI is a great way to reduce the risk of improper coverage.

5. Don’t Jump The Gun:

No matter how urgent it is to begin working a job, it is not worth risking the livelihood of your business. All too often businesses permit vendors to begin working on a job without reviewing and approving their COIs. You may get away with this once or twice, however, this bad habit can and will lead to issues moving forward. 

6. Record and Respect the Expiration Date:

One of the first pieces of data to extract from a COI is the expiration date of the policies listed. Ask yourself, what if the insured’s coverage expires in the middle of the project? Record and monitor the expiration dates for all policies listed on the COIs and make sure to follow-up for renewals. 

7. Outsourcing:

Depending on the size of your business, you may not be able to handle a comprehensive system for managing COIs internally. A common alternative is to outsource the responsibility of managing your COIs to your insurance broker. Skyline Risk Management, Inc. can oversee and manage your COIs for you. 

If you have specific questions about how you can manage your COIs, contact Skyline Risk Management, Inc. at (718) 267-6600 for more information. 


THE SKYLINE DIFFERENCE

Other brokerages take a cookie cutter approach to insurance and outfit their customers with generic coverage.  Skyline is different.  We believe insurance should be built on innovation and experience. We appreciate the fact that every engagement is unique and understand proper coverage requires a deep understanding of the underlying business and individual.

"The opportunity to safeguard your concerns is a privilege we never take for granted."

Commercial General Liability and the Prior Work Exclusion

Commercial General Liability and the Prior Work Exclusion

What is a policy exclusion?

A policy exclusion is anything specifically not covered by your insurance policy. Every insurance policy has a designated section called “Exclusions”. The purpose of an exclusion is to limit coverages appropriately. Some policies offer coverage for certain risks for which the insured may not need coverage. Exclusions serve to limit excess coverages and often help reduce the cost of insurance.

What is a Commercial General Liability (CGL) policy?

Commercial General Liability (CGL) policies are commonly referred to as General Liability (GL) policies and cover a business for liability against bodily injury (BI) and property damage (PD). CGL policies cover claims, which occur on the premises, or from operations, product and completed operations, and/or advertising personal injury (PI) liability.

Commercial General Liability Exclusions:

Excluding certain coverages from your CGL policy is not a bad thing. Of course the more coverage you have the better protected you are, however, excess coverage for risks that are outside the regular scope of operations may be deemed unnecessary. A big reason why policyholders elect to include calculated exclusions is to remove unnecessary coverages for a reduced premium. On the flip side, carriers commonly issue exclusions for certain risks they are not willing to insure against.

The Prior Work Exclusion:

A popular CGL exclusion carriers request is the Prior Work Exclusion. For example, Paul is a contractor and carries a CGL policy with ABC company effective from January 1st, 2016 to December 31st, 2017. All throughout 2016, Paul is working and completing various jobs.

At the end of 2016, Paul is approached by XYZ insurance carrier offering the same coverages as ABC carrier but at a much more affordable premium. However, XYZ carrier’s policy includes something call a prior work exclusion. Not knowing the significance of the prior work exclusion Paul cancels his policy with ABC carrier and binds with XYZ carrier. Paul believes he made a wise decision because he has the same coverage limits he had with ABC carrier but at a more affordable rate. 

Four months later Paul gets a phone call from one of the clients he performed work for during 2016. The client informs Paul that one of the walls Paul built in the client's office unexpectedly cracked and fell down during the middle of the work day. The felled wall caused significant property damage and bodily injury to one of the client’s employees. The client is not happy and plans to sue Paul for damages. 

Paul calls XYZ carrier to submit the claim. XYZ carrier denies Paul’s coverage because of the prior work exclusion, which clearly states no work that was performed before the effective date of the new policy is covered. Paul now realizes that the prior work exclusion leaves him vulnerable to any and all work he completed prior to the effective date of his policy.

The Lesson Learned:

If you take away anything from this article, understand that exclusions can have a major impact on the quality of a policy. Do not take exclusions lightly and do not underestimate their importance. On the other hand, do not be afraid of exclusions either as some exclusions are okay when coverage is deemed excess and/or unnecessary. The best person to help you make these decisions is your insurance broker. A good broker will be able to identify these potential issues and will recommend alternative coverages to fit the unique needs of your business. 


THE SKYLINE DIFFERENCE

Other brokerages take a cookie cutter approach to insurance and outfit their customers with generic coverage.  Skyline is different.  We believe insurance should be built on innovation and experience. We appreciate the fact that every engagement is unique and understand proper coverage requires a deep understanding of the underlying business and individual.

"The opportunity to safeguard your concerns is a privilege we never take for granted."

Insuring Completed Operations Pollution Risks

Insuring Completed Operations Pollution Risks

Construction companies are increasingly relying on specific insurance policies that protect against lawsuits regarding contamination and pollution. Contractor’s pollution liability, or CPL policies, help construction companies that may face lawsuits related to construction projects.

Pollution and contamination issues related to construction projects garner a lot of negative attention. They can also be financially and professionally difficult to navigate for companies involved in lawsuits. CPL policies can protect project owners and any contractors involved from liability claims.

Pollution, contamination, and other harmful environmental issues can occur during a construction project or after it has officially been completed. During a construction project, excavating, building roads, operating heavy machinery, and the materials used for the building can have a negative impact on the earth around the project.

If something should go wrong during the construction project, the mistake might not be known until after the project has been completed. A CPL policy helps minimize a project’s liability when it comes to environmental issues.


Project-specific policies

Project-specific CPL policies are useful for insuring a particular project that could have an environmental impact in a concentrated area. Obviously, the risk of pollution or contamination are highest where the construction is occurring. In most cases, contractors on a project will purchase a CPL policy and include the owner of the project as the additional named insured on the policy.

Although the instances of CPL policy purchase have increased, there are still some coverage gaps that need to be addressed. Often, the wording of the insurance requirements from the project owners conflicts with the CPL policies.

CPLs come in occurrence and claims-made forms. When a CPL is claims-made, additional insurance is needed for any issues that may arise after the construction project is completed. An occurrence-based policy doesn’t require any additional insurance purchases, but this can cause an increase in risk of claims made after the project is over. If a project owner or contractors choose not to purchase completed operations insurance additions to their CPL policy, this can leave a dangerous coverage gap.

Regardless of policy type, a project owner or contractor’s liability is only for the time period that the insurance policy is for. If damages occurred during that period, the insurance policy comes into play. Having a CPL policy and a completed operations policy can keep a project protected for longer.

A completed operations period refers to the time that a project has been completed, but issues related to the project may still cause problems. This can be a difficult timeframe to pin down. Some projects are more likely to cause pollution or contamination issues during construction, while others may have a bigger environmental impact after the job is done.


Benefits of CPL policies

CPL policies come with a few benefits. One benefit is that a CPL policy is project-specific, meaning an insurance policy can be tailored to an individual project’s characteristics. A policy holder can take into consideration the expected duration of the project, when the most environmental damage may occur, and what the completed operations period might be.

There are many insurance policies that try to cover environmental issues as part of a blanket policy. Having the ability to cater an insurance policy to the needs of a particular project decreases gaps in coverage and helps keep your risk lower for longer.

Additionally, you can choose to purchase completed operations coverage for claims or occurrence policies to cover all bases left by a construction project. CPL insurance isn’t the same as a general liability policy or other environmental insurance policies. An expert in environmental insurance issues should be consulted for your individual project to determine the best insurance for your project.


THE SKYLINE DIFFERENCE

Other brokerages take a cookie cutter approach to insurance and outfit their customers with generic coverage.  Skyline is different.  We believe insurance should be built on innovation and experience. We appreciate the fact that every engagement is unique and understand proper coverage requires a deep understanding of the underlying business and individual.

"The opportunity to safeguard your concerns is a privilege we never take for granted."
 
 
 

Issues in Contractual Privity

Issues in Contractual Privity

Legal issues regarding contractual privity have been occurring around the country, many with conflicting results. This issue primarily affects the construction industry, where insurance policies from the parent company or contractor is filtered down through other third party contractors and subcontractors.

Solving this insurance problem would make it financially safer not only for construction companies, but for the people who work as part of the construction industry. Every part is important to one another, and subcontractors are an integral part of the construction industry. Resolving the issue of contractual privity would make it easier to know what is covered by an insurance policy and what is not.


Explaining blanket additional insurance

When a general contractor or a project owner has insurance for a particular project, they are often able to transfer that insurance to include the people and companies they hire to work on that project. The transfer of insurance comes with the obligation to purchase additional insurance and a contractual risk transfer.

This insurance is known as blanket additional insured endorsements. This kind of insurance is triggered by a written contract that outlines the required additional insurance, as well as a loss that is connected to the person or company who holds the original insurance policy. This becomes very important when a company or subcontractors are trying to decide if the original insurance policy is enough, or if all parties need to be insured by the original policy or blanket insurance additions.

In construction, it can be helpful to have direct contractual contact between two companies to ensure insurance coverage for all involved. In this kind of agreement, general contractors or subcontractors under a parent company may be required to name that owner or parent company on their general liability policies. Without a direct contract between the two parties, it may be difficult to decide if the insurance policy will cover the owner or parent company in case there is an issue.


Legal Ramifications

Cases regarding contractual privity have been ongoing in Connecticut, Maine, and Texas. These cases found that contractual privity (that is, the agreement between two entities) is not required for additional insured endorsements.

The first case in Connecticut, known as First Mercury Insurance versus Shawmut Woodworking, was decided in favor of Shawmut Woodworking. An accident occurred with a subcontractor working under a company working under Shawmut Woodworking. Shawmut Woodworking had taken out additional insurance endorsements with First Mercury Insurance, under the contractual policy that “any person or organization for whom you are performing operations when you and such person or organization have agreed in writing in a contract or agreement that such person or organization be added as an additional insured on your policy.…"

This statement was taken as evidence that a direct contract between Shawmut Woodworking and the two subcontracting companies was not needed.

The case in Maine involved Pro Con, Incorporated, and Interstate Fire and Casualty. Pro Con was doing a project at Bowdoin College and there was a contract required between Pro Con, Bowdoin, and a subcontractor of Pro Con called Canatal. Canatal then hired another subcontractor that was also required to name Pro Con, Bowdoin, and Canatal as additional insureds on their general liability policy.

In the court case, Pro Con was sued by a subcontracted employee. The details of the blanket endorsement didn’t specify that there needed to be a written contract between all the subcontracting companies, but rather that there just needed to be a general written contract.

Opposing legal action

Other legal cases around the country have found that contractual privity is required, putting into question the impacts of differing legal systems between the states. The laws regarding contractual privity are constantly evolving, but remain incredibly important for companies that work in the construction industry.


 

THE SKYLINE DIFFERENCE

 

Other brokerages take a cookie cutter approach to insurance and outfit their customers with generic coverage.  Skyline is different.  We believe insurance should be built on innovation and experience. We appreciate the fact that every engagement is unique and understand proper coverage requires a deep understanding of the underlying business and individual.

"The opportunity to safeguard your concerns is a privilege we never take for granted."